Context:
The World Bank’s ‘South Asia Regional Update: Jobs for Resilience report’ raises concerns over the South Asia region, including India, failing to capitalize on its demographic dividend. Despite projecting a robust growth rate of 6.0-6.1% for 2024-25, the report indicates that the pace of job creation in the region is insufficient compared to the growth in the working-age population. This mismatch suggests a missed opportunity to fully leverage the potential economic benefits of a youthful and growing workforce in South Asia.
Relevance:
GS III: Indian Economy
Dimensions of the Article:
- Key Highlights from the Jobs for Resilience Report
- Risks Highlighted in the Report
- Case of India
- Way Ahead Suggested in the Jobs for Resilience Report for India
Key Highlights from the Jobs for Resilience Report:
Economic Growth:
- South Asia’s output growth is projected at 6.0-6.1% for 2024-25, surpassing other emerging markets and developing economies (EMDE).
- Strong growth is primarily driven by India, while growth in the rest of the region remains below pre-pandemic levels.
- The public sector is the main growth driver in South Asia, with weak private investment.
Vulnerabilities and Risks:
- Despite growth, South Asia faces underlying vulnerabilities leading to potential downside risks.
- Private investment growth has slowed significantly across all South Asian countries, hindering development and climate goals.
- South Asia’s fiscal limitations constrain public policies for climate change adaptation.
- This results in increased burdens on firms, farmers, and vulnerable households due to climate shocks.
Labour Market:
- South Asia’s labour market challenges are notable among EMDEs.
- Employment ratios are declining, and there’s a low share of women in employment.
- The agriculture sector has reduced labour, while non-agriculture sectors struggle to create jobs.
- Challenges in the economic and institutional environments have restrained firm growth.
- The region’s output growth is now heavily reliant on labour productivity and population growth, both of which are decelerating.
Risks Highlighted in the Report:
Debt and Fiscal Deficits:
- Efforts to reduce debt, borrowing costs, and fiscal deficits might constrain growth and limit responses to climate-related shocks.
Climate Adaptation:
- Providing public goods is crucial for effective climate adaptation.
- Households and farms, especially those shifting to non-agricultural jobs, benefit significantly from these public goods.
- Limited opportunities to shift from agriculture make certain adaptation strategies less effective.
Employment Trends:
- Employment challenges are more pronounced in non-agricultural sectors.
- Despite a growing working-age population, employment growth lags, preventing the region from fully utilizing its demographic potential.
- South Asia’s output growth could increase by 16% if its employment rate matched that of other EMDEs.
Case of India:
Employment Growth:
- From 2000 to 2023, India’s employment growth lagged behind its working-age population growth.
- India witnessed a significant decline in its employment ratio up to 2022, second only to Nepal in the region.
- Preliminary data for 2023 showed a 3-percentage point improvement, partially offsetting the previous decline.
Economic Growth:
- With an expected robust growth rate of 7.5% in FY23/24, India is a key driver of the strong economic performance in the South Asian region, alongside recoveries in Sri Lanka and Pakistan.
Way Ahead Suggested in the Jobs for Resilience Report for India:
Boosting Growth and Investment:
- Emphasize stronger job creation and relax financial market restrictions to enhance growth, private investment, and government revenues.
Conditions for Investment:
- Private investment is likely to increase when there’s strong institutional quality, competitive real exchange rate, and openness to trade and capital flows.
Effective Adaptation Strategies:
- Publicly supported adaptations are generally more effective.
- Policy guidance should focus on:
- Implementing comprehensive policy packages.
- Prioritizing policies with dual benefits.
- Designing policies that don’t compromise climate goals while achieving other objectives.
Sustaining Growth and Employment:
- Increase employment ratios, particularly in non-agricultural sectors and among women, by:
- Removing growth impediments for businesses.
- Enhancing openness to international trade.
- Relaxing labour and product market restrictions.
- Investing in human capital.
- Promoting equality and women’s rights.
-Source: Down To Earth
